New Study Proves Once Again That “Trickle-Down Economics” Are A Massive Scam

trickle down economicsHow many times have you heard conservatives tell you that the rich are taxed too much? To hear the proponents of trickle-down economics tell it, you’d think that multi-millionaires and billionaires are the financial equivalent of the polar bear – an endangered species that must be protected at all costs. Every year, the poor billionaire has to go further and further to find sea ice to park his money on, won’t you please think of the polar bears? (Cue Sarah McLachlan’s “Angel” in the background as the camera zooms in on the faces of paunchy billionaires with sad puppy dog faces.)

For the past few decades, we’ve been told that if we cut tax rates on the richest people in the United States, trickle-down economics would finally work and we’d all be floating in a warm sea of jobs and unbridled prosperity. Yet the fact remains that despite tax rates for the wealthiest Americans being near historic lows, prosperity for everyone else just isn’t happening. Here in Louisiana, state universities are preparing for the possibility that they will have to declare bankruptcy, despite the fact that only 1 in 4 Louisiana corporations pay any net income tax and lawmakers are unwilling or unable to find new ways to close a $1.6 billion budget shortfall.

Now a new study from the National Bureau of Economic Research shows that giving tax cuts to the wealthiest has very little effect on the economy, further proving that trickle-down economics are nothing more than a scam designed to leverage more tax breaks for those who can easily shoulder the burden.

The study from Owen Zidar, a professor at the University of Chicago Booth School of Business, found that tax cuts aimed at the top 10 percent of earners produce little stimulative effect on the overall economy. On the other hand, those aimed at the bottom 90 percent have a greater impact.

Zidar examined the short- to medium-term impact of tax changes at the state and federal levels going back to 1948. On the national level, he found a 1 percent gross domestic product (GDP) tax cut aimed at the bottom 90 percent translates to job growth of 2 to 5 percent, but the impact of a similar cut on the top 10 percent of earners has a negligible effect. He reached similar conclusions on the state level: Tax decreases for most of the population generated 5 percent employment growth, but yielded little change when applied to the top income bracket.

Tax hikes produce similar effects, the paper says. When applied to the rich, they’re insignificant. But when applied to the rest of the population, they have a negative effect on economic activity. (Source)

Conservatives like to say that liberals and progressives base their arguments on emotions and not numbers or facts, but here we have a study backed by years of economic data which shows that trickle-down economics just don’t work.

The 1990s were the last great period of economic prosperity for all Americans – including the rich. Then there was nearly a decade under Bush policies which became a “lost decade” for the middle class during which income fell and the size of the middle class also shrunk. Since the rebound after the Great Recession of 2008, the economic swing has not benefited the middle class nearly as much as the richest Americans – but once again, we’re being told that the rich are taxed too much and we need to give them more breaks so that trickle-down economics will finally come into play.

If you look at this study and grasp how supply and demand works, it’s very clear that a strong economy which benefits all Americans (including the wealthy) depends on more money in the hands of more consumers, not more money in the hands of the 1%. Trickle-down economics are nothing more than a lie that has been repeatedly debunked, and this economic study proves again that they don’t work.


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  • Kipco

    The argument for Trickle Down is academic. It works on paper and in theory but not in practice because it relies too heavily on the beneficiaries doing the right thing with their windfall. Trickle Down advocates place far too much faith in capitalists and “free markets” and they point to a small handful of success stories that are mostly happy accidents or just sheer luck as validation of this theory. But without a compelling reason to invest, that money isn’t going to go anywhere except into dividends for stockholders,
    off shore bank accounts or Wall Street stock options. The real legacy of trickle down is job eliminating automation, cheap labor off shoring, big corporations and investment firms buying up and closing manufacturing facilities that sustained the economies of small communities all across the country. Trickle down works for those at the top, everyone else, not so much.
    The Pope said it best..”“Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacra­lized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.”

  • strayaway

    If Bush’s 10 year tax cut for the rich was so bad why did Obama make half of those tax cuts permanent after those ten years? After twenty years, Obama will have given as much away as much as Bush did to the rich.

    “there was nearly a decade under Bush policies which became a “lost decade” for the middle class during which income fell and the size of the middle class also shrunk.”

    Under Obama income has continued to fall and the middle class continues to shrink. In fact, the 1% is garnering an increasingly larger share of the national economic pie under Obama than under Bush. This after Democrats held the presidency and senate for six years plus the House for another two years. It must be still be all Bush’s fault, right?

    That was quite a flimsy use of “supply and demand”. It’s true that if everyone had more money, “including the wealthy”, we would have a stronger economy, at least as measured by spending, but there would also be inflation eroding those dollars spending power. A better way to employ supply and demand would be adopt policies reducing both the number of working and middle class jobs sent overseas and the amount of cheap foreign labor allowed into the US to compete for remaining jobs. The demand for US labor would skyrocket allowing labor to DEMAND a larger share of our national wealth. Obama and establishment Republicans, of course, are doing the opposite by importing more labor and trying to fast track the TPP.

    • elyhim

      Because the Republicans shut down the government and dmeanded he end welfare, SSI and Medicaide so he made a deal. Weren’t you paying attention?

      • strayaway

        Truman: The buck stops here.
        Obama: It’s Bush’s fault.

        Actually, the last time the government shut down any neutral observer or anyone who preferred democracy over dictatorship would have to conclude that Obama and democrats shut government down to the extent that some services were trimmed. The House passed the budget and had pared its initial demands from ending the (un)ACA to just a face saver – ending the new Obama tax on medical equipment but with Obama it was his way 100% or shut down the government. That is his idea of negotiations – none. So with several days to respond before sequestration took hold, the Senate chose to sit, not negotiate, not make a counter offer, anything…just let parts of the government shut down knowing the the sheep people would blame it on Republicans. Baaaa. But nice try at covering for Obama for making half of Bush’s tax cute permanent. Think about it. Obama made half of Bush’s tax cuts permanent and you are making excuses for his doing so.

      • Citizen Zero

        It must be fun being able to play pretend as an adult. I wish I could pretend things just didn’t happen and make up things that did.

      • strayaway

        Too bad you can’t dispute the facts. The House bill was allowed to die in the Senate because the Senate reused to compromise or counter offer. The Senate refused to negotiate. The Senate’s idea of negotiation was agree to 100% of what our petulant president wanted, capitulation, or or it would shut down the government.

        There was a second issue I forgot to mention. The House had wanted to delay the introduction of certain mandates in the (un)ACA. It doesn’t matter, because the president, acting as dictator, later set back those mandates anyway after the government reopened. Who needs Congress anyway since the president began ignoring and changing laws with his phone and pen? Many of you Democrat are like those on the side of the room that voted for the Enabling Act of 1933 allowing another executive to change laws as suited him.

  • Clintoris

    Everyone should pay a flat rate.Including those on welfare who pay in nothing yet reap the benefits from those who do.

    • Brian

      Flat rate still greatly favours the rich and is an inefficient and impossible means of doing taxes. Flat rate is libertarian tripe.

  • Frank DiChutney

    e similar effects, the paper says. When applied to the rich, they’re insignificant. But when applied to the rest of the population, they have a negative effect on economic activity.

    Doesn’t do much to raise taxes on the rich,either, except get Dems votes for looking like a redistribution hero.

  • wendy

    There should only be conditional tax breaks. For every livible wage hire, break; investing to create jobs and prove it, break. Otherwise pay fair share.
    The wealthy will not use breaks to create jobs otherwise.
    To believe anything else is jibberish

  • Citizen Zero

    As Steinbeck put it: “Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.”